The Rights of Account Holders
Elgar Financial Law series
Chapter 6: Bank account relationships
The central bank payment is a unique form of payment because it results in a claim on an institution that cannot go bankrupt, i.e., the central bank. The counterparty credit and liquidity risks are not present in central bank payments. In contrast, completion of a payment using a private bank's money not only depends on a sufficient amount of funds being held in the bank account but also on the bank's creditworthiness. Payments effectuated at the top level through a central system are typically subject to a special regulatory framework adopted by the central bank (e.g., the Central Bank of Mexico) or a private operator of the system (e.g., CHIPS). Transfers made over the Fedwire are regulated by Regulation J issued by the Board of Governors of the Federal Reserve, which incorporates UCC Article 4A, and FED Circular 6, which is binding on the parties to a funds transfer made through the Fedwire. Such circulars and regulations supersede any inconsistent provisions of UCC 4A. Rights and obligations of participants in CHIPS are governed by the New York version of UCC 4A and the CHIPS Participant agreements. EU Member States have also adopted specific legislation regulating rights and obligations of parties to funds transfers and the operation of central payment systems.
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